Understanding the importance of your credit rating

Now that you are living in Canada, you will probably need to buy some things to make your life more comfortable. You may need winter clothes or school supplies for your children, new furniture, or maybe even a car or a house. If you do not have enough money to buy these things, you will need to borrow money. Any money you borrow is called credit.

Credit comes in many forms, like a credit card account, a personal loan, or a mortgage. When you borrow money, you and the lender agree when you will repay the money. If you repay the money on time, you build a good credit rating – also called a credit score. If you do not repay the money on time, you can hurt your credit rating. A good credit rating is important because it tells lenders that they can trust you to pay your bills and pay back loans. This will help you get more credit in the future if you need it, and get better interest rates.

Who gives you your credit rating?

In Canada, two large agencies – Equifax Canada and TransUnion Canada – look at your financial history to give you a credit-rating number, also called a credit score. The higher your score, the better.

How do you establish a credit rating in Canada?

Your credit history from your home country does not come with you. You will have to start building a new credit rating in Canada. One of the easiest ways to do this is with a Canadian credit card.

Credit cards make it easy for you to buy things when you do not have enough money in your bank account, or if you cannot pay with cash. By using your credit card and repaying the money that you borrow on time, you will create a good credit history. This will help you get a good credit rating. Here are some other reasons to get a Canadian credit card:

  • You can show your credit card when somebody asks you for identification
  • If you pay back all of the money you borrow every month, you will not have to pay interest
  • Carrying a credit card is safer than carrying cash
  • You can use it to pay for things that you buy online
  • In Canada, people use credit cards to pay for hotel bookings, car rentals, and airline tickets
  • Credit cards can help you manage your spending

Understanding your credit score

Once you have started building your credit rating in Canada, you can get a copy of your credit report. This report will tell you what your credit score is. Your score will be a number between 300 and 900. The higher your score, the better your rating. 

You can get a copy of your credit report from either TransUnion Canada or Equifax Canada

Start building your credit rating now

CIBC can help. Visit your local branch or call 1-800-465-2422.